While Operation Twist was exactly what investors had been anticipating, meeting expectations with the bare minimum came up short of pleasing them.

The Dow Jones industrial average (INDU) dropped 284 points, or 2.5%, with all but one of the blue-chip index's 30 components closing in the red.

Hewlett-Packard (HPQ, Fortune 500)was the only Dow component that traded higher, spiking almost 7% amid rumors that HP's board is considering a shakeup that would include replacing currentCEO Leo Apotheker.

The S&P 500 (SPX) fell 35 points, or nearly 3%. Even the tech-heavy Nasdaq composite (COMP), which had been trading higher most of the day, closed down with a drop of 52 points, or 2%.

"Operation Twist was priced into the market, and investors needed a twist on the twist -- something more," said Doug Roberts chief investment strategist for Channel Capital Research.

While the Fed said it will also reinvest the proceeds from maturing mortgage-backed securities into more mortgage-backed securities, Roberts said that additional step is still lacking.

What would help satisfy financial markets is if the Fed were to bite the bullet and pump more money into the economy with another round of Treasury buying, or QE3, he added.

But experts said the Fed, which is running out of policy tools, will probably hold back from expanding its balance sheet unless investors and consumers grow warier.

"By not mentioning QE3, it definitely appears that the central bank is saving their few remaining bullets in case the volatility in financial markets intensified or the U.S. economy falls into recession," said Kathy Lien, director of currency research at Global Forex Trading.

Venizelos had held two days of talks with officials from the European Union, European Central Bank and International Monetary Fund in an effort to gain consensus on measures needed to secure the next installment of Greece's bailout. Talks are expected to continue this weekend in Washington, D.C., where the IMF and World Bank are meeting.

"There have been a lot of conversations, and statement of support for Greece, but the market's have heard enough. We need action," said Rob Lutts, chief investment officer at Cabot Money Management. "Investors want to know and see who will put up money to bailout Greece and how much Europe's banks will lose in the event of a restructuring or default."

Economy: The National Association of Realtors said existing home sales rose 7.7% in August to an annual rate of 5.03 million homes. Economists were expecting sales to have risen only 0.6% during the month.